Report Warns of Potential Tax Bills on Forgiven Student Loan Debt in US

A new report from the advocacy group Protect Borrowers, cited by Business Insider, indicates that federal taxes on canceled student debt could lead to unexpected tax bills ranging from $6,000 to $12,000 for up to 3 million federal student loan borrowers in 2026. This potential financial burden arises because a temporary federal tax exemption for canceled student debt, enacted under the American Rescue Plan, expired in 2025. Consequently, any student loan forgiveness completed from 2026 onward, particularly under income-driven repayment plans, is once again considered a taxable event for borrowers.